By Corey Rosen, NCEO
Employee-Owned America publishes a lot of articles on why employee ownership works. But can EO advocates put their money where their keyboards are? Results from the first U.S. mutual fund created to test this idea suggest that the answer is yes.
On June 19, 2017, the National Center for Employee Ownership created the Employee Ownership Index, a collection of 28 publicly traded companies. To make the cut, companies had to meet two qualifications: (a) broad-based employee ownership; and (b) winning at least one of three major national employer-rating awards, each of which puts a high emphasis on employee engagement (Fortune’s Best Companies to Work for, the Gallup Engagement Index, and the Enterprise Engagement Alliance awards). The “broad-based employee ownership” criterion included ESOPs with an average account balance of at least $30,000 and companies that provided equity grants to most or all full-time employees.
In its first year, the Employee Ownership Index had a 30.3% return, compared to a 15.5% return for the S&P 500. The index was expanded to 30 companies in June 2018. As of mid-January 2019, the relative return is 28% to 12%. More tellingly, the index has outperformed the S&P in every time period—one month, three months, six months, one year, and since inception.
Research has overwhelmingly shown that companies with broad-based ownership and high employee involvement in work-level decisions outperform other companies. This is the first time, however, that an index has been created that people can invest in.
The fund is available at Motif, an online trading platform that allows users to create their own “motif,” or basket of stocks. Investors can make a motif an option for other users to buy. When you buy a motif, you are not buying a fund but rather are investing in all the stocks and/or ETFs that make up that motif. To invest in the Employee Ownership Index, simply go to the Motif website and open an account. Once you have done that, you can trade the Employee Ownership Index.